Question

At September 30, 2018, the accounts of Green Terrace Medical Center (GTMC)

include the following:

Accounts Receivable \( 145,000

Allowance for Bad Debts (credit balance) 3,500

During the last quarter of 2018, GTMC completed the following selected transactions:

• Sales on account, \)450,000. Ignore Cost of Goods Sold.

• Collections on account, \(427,100

• Wrote off accounts receivable as uncollectible: Regan, Co., \)1,400; Owen Reis, \(800;

and Patterson, Inc., \)700

• Recorded bad debts expense based on the aging of accounts receivable, as follows:

Age of Accounts

1–30 Days 31–60

Days

61–90

Days

Over 90

Days

Accounts Receivable \( 104,000 \) 39,000 \( 14,000 \) 8,000

Estimated percent uncollectible 0.3% 3% 30% 35%

Requirements

1. Open T-accounts for Accounts Receivable and Allowance for Bad Debts.

Journalize the transactions (omit explanations) and post to the two accounts.

2. Show how Green Terrace Medical Center should report net accounts receivable on

its December 31, 2018, balance sheet.

Short answer

(1) Journal entries and T accounts are reported in Step 2.

(2) Under Partial Balance Sheet, net accounts receivable will be reported at $156,518.

Step-by-step solution

Calculation of bad debts

Bad debts are calculated as follows:

Journal Entries

Date	Particulars	Debit	Credit
September 30, 2018	Accounts Receivable	$450,000
	Sales Revenue		$450,000
	(Being entry to record sale)
September 30, 2018	Cash	$427,100
	Accounts Receivable		$427,100
	(Being entry to record the cash receipts)
September 30, 2018	Allowance for Bad Debts	$2,900
	Accounts Receivable		$2,900
	(Being entry to record allowance)
September 30, 2018	Bad Debt Expense	$7,882
	Allowance for Bad Debts		$7,882
	(Being entry to record bad debt expense)

Accounts Receivable
Balance September 1, 2018	$145,000	$427,100	September 30, 2018
September 30, 2018	$450,000	$2,900	September 30, 2018
Balance September 30, 2018	$165,000

Allowance for Bad Debts Account
September 30, 2018	$2,900	$3,500	Balance September 1, 2018
		$7,882	September 30, 2018
		$8,482	Balance September 30, 2018

Balance Sheet

Green Terrace Medical Centre
Partial Balance Sheet
On December 31, 2018
Accounts Receivable	$165,000
Less: Allowance for bad debts	($8,482)
Net Accounts Receivable		$156,518